Right this minute, in offices around the world, business-people are holding high-level meetings to talk about strategy. They’re trying to figure out if they can really achieve the lowest costs, or if they should focus on differentiating their product or try to dominate a niche in the business, and someone is suggesting they try to do a little bit of each, and someone else is replying they’d be doomed. “Should we really be doing all the activities in the value chain?” “No! We need to outsource!” The meetings are getting heated because everyone realizes the decisions could mean life or death.
If you interrupted one of these meetings and asked the participants why they’re discussing these questions, they’d look at you funny. It’s perfectly obvious, after all, that these are the most crucial issues. We talk about them because we have to, and everyone has been talking about them since the dawn of time, they would tell you. But they would be mistaken.
Generally without knowing it, they—we—are speaking the language of Harvard’s Michael Porter, the most famous and influential business professor who has ever lived. Incredible as it seems, there was a time when these concepts were not the foundation of most business thinking. Says Roger Martin, the longtime dean of the University of Toronto’s Rotman School of Business and a former colleague of Porter’s: “Everyone who talks about sustainable competitive advantage and how they’re going to get it — they don’t say, ‘This meeting is occurring because Mike Porter said it’s important.’ But that is why.”
Businesspeople aren’t the only ones who speak Porter’s language. Leaders of nations, regions, and cities use his “diamond model” to frame their plans for becoming more competitive. Environmental policymakers apply the Porter hypothesis. Health care reformers study his work on transforming that broken industry.
You might suppose that Porter, at 65 and having exerted a career’s worth of influence, might be ready to hang it up. He isn’t. He looks 55 and has more energy than the average 35-year-old. “What I’m particularly fortunate about,” he says — he talks a lot about how lucky he has been — “is that I really love doing this stuff. I mean, I’m not tired of it. I’m not fatigued. So many academics get tired.”
Competition and winning have defined Porter’s work and in large part his life. He has said that sports were the center of his existence as a kid, and at Monmouth Regional High School in New Jersey he was an all-state football and baseball player. At Princeton, where he majored in aeronautical engineering, he made the NCAA All-America golf team and graduated Phi Beta Kappa. He went directly to the Harvard Business School, where he realized he wanted to teach and where he became a Baker Scholar, a distinction reserved for the top 5% of the class. He then made the unorthodox move of crossing the Charles River to get a Ph.D. in Harvard’s economics department; he won the prize for the year’s best thesis. Then he recrossed the river to teach at HBS.
He already knew what the focus of his research would be. As an HBS student, he had absorbed “the practitioner view of competition,” but back then it didn’t include many general insights; each case was unique. As an economist, he understood “the more abstract view of competition that one saw in industrial economics,” and it was the opposite: Individual firms were all pretty much the same and not interesting. “It was the juxtaposition of these various kinds of training that made it sort of obvious what some of the rich opportunities were,” he says. So those were what he worked on.
He explained the results in Competitive Strategy, which quickly became the bestselling business book ever up to that time. Every company, he said, is subject to five forces: the competitors it currently faces, the threat of new competitors, the threat of substitutes for its products or services, the bargaining power of its suppliers, and the bargaining power of its customers. Within that environment, every company must choose a strategy, and there are only three: achieving the lowest costs, differentiating its products and services, and dominating a niche. Trying to do some of each — getting “caught in the middle” — prevents a company from realizing the benefits of any of these strategies, and as a result it will lose to competitors who choose just one.
The book revolutionized managerial thinking around the world and made Porter famous. It also sparked another widespread reaction: “The highest compliment, I’ve come to understand, is, ‘Oh, that’s obvious,’” Porter says. “I used to get really mad about that, but now I understand that’s the goal — to take a complex problem and make it seem really clear and obvious.” Real-world practitioners agree. “The five-forces framework is as valid today as it was then,” says Adrian Slywotzky, a consultant.
A great paradox of Porter’s career is that he has achieved the summit of academic distinction while loudly rejecting the No. 1 rule of the academic game. It states that all advancement depends on publishing as many articles as possible in the few dozen top-tier academic journals. Porter has scarcely bothered, publishing just seven such articles in his 39-year career. His many articles in the Harvard Business Review don’t count; that’s a mere “practitioner journal” in the view of academics. Yet Porter holds a University Professorship at Harvard, the highest honor the school can bestow, held by about 1% of the faculty; it means he isn’t tethered to any particular school within Harvard, not even the business school, but can roam across the entire university wherever his interests lead him.
Another measure of his academic success, telling and ironic: In the many footnotes that follow every article in academic journals — the journals Porter has so frankly disdained — he has been cited far more often than any other writer on business or economics.
The U.S. Competitiveness Project is the largest example yet of Porter’s real-world influence. “We are judging this project on impact,” says Rivkin. “It’s successful to the extent we help companies operating in the U.S. compete in the global economy and raise the standard of living.”
Porter knows he’s trying to do too much. A lesson he has learned belatedly is to “enroll others” in his projects, with the U.S. Competitiveness Project as exhibit A. But taking on too much seems to be in his nature, so he’ll probably keep doing it. At least until he gets tired. Which right now is not a real-world concern.
This story is from the October 29, 2012 issue of Fortune.
